Today we announced the launch of bitcents, a new micropayments platform for news publishers online. We built bitcents because we believe that rigorous, ethical journalism has an economic as well as a societal value, and we hope that it will be a tool that publishers of all shapes and sizes will use to make the most of their content online. We’re excited about the potential for paid content on the web, but while everyone from Rupert Murdoch to Steve Brill is evangelizing its benefits, the data are more ambiguous: recent surveys in the UK have found that somewhere between 5% and 84% of readers would be willing to pay for content online. That’s why we think it’s important to engage in an honest discussion about the opportunities and limits of charging for online news.

The basics (supply, demand, and the long tail)

Before we even start talking about micropayments, we should acknowledge some basic prerequisites of any trade:

People must be willing to buy what you’re offering.

It must be easy for your customer to complete the transaction.

These points may seem obvious, but they are missing from many discussions about the potential for paid news content on the web…especially among those who believe such a model can work. We’ve built bitcents to address the latter requirement, and we’re excited to work with publishers to better understand (and satisfy) the former.

What makes something worth buying? Put simply: supply and demand. As paid news skeptics regularly and rightly point out, the supply of free national and international news is huge, and perhaps inexhaustible. It is therefore unlikely that national or quasi-national newspapers will be able to charge for their online content in the foreseeable future. (As an aside, Britons regularly point to the BBC’s provision of free, high-quality news as a source of particular woe, but the glut of general news available in the US and in other countries around the world suggests that the market is equally prepared to provide similar challenges.)

The skeptics would leave it there, forgetting that while general news, by definition, attracts the largest audiences, it is only a small fraction of the total news produced each day. Most news remains specialized, attracting an audience within a specific locality, discipline, or industry. This is the long tail that the Internet supposedly serves so well. Unfortunately, these are the publishers who have been hit hardest by the changes the web has wrought on the advertising industry; sites with fewer than two million monthly visitors struggle to extract the full benefit from online advertising. On the plus side, these smaller publishers are more likely to produce original, high-value content that is suited to direct payment.

Trusted guidance is more valuable than ever (or: the PageRank fallacy)

Newspapers, of course, have always been more than the sum of their parts: by bundling stories together, a newspaper is a guidepost to what matters, and why. The web has undermined the information scarcity that gave newspapers their primacy in this role. Online, readers skip from site to site for information, consuming content in an atomized way that has no parallel offline.

As more people and more information move online, though, the need for trusted guides will only increase. With billions of pages being added to the web daily, people are finding it more difficult to discern what matters. That’s hardly surprising: On the web today, people discover content primarily through search engines and word of mouth. These are invaluable tools for discovery, but they are better at identifying what is popular than what is important. As an example, we can look to Wikipedia, which (for all its strengths) dedicates nearly four times as many words to Harry Potter as it does to the printing press. The wisdom of crowds (and algorithms that tap into it) are well-suited to the recommendation of general interest material, but more specialized interests remain elusive. The value of editorial judgment, meanwhile, has yet to be established online. bitcents provides both publishers and developers with new incentives to provide just such guidance.

The web is good for content (even when it hurts)

There’s no doubt that web has changed the how people consume information: for the first time in history, the average person has access to information on virtually any topic at a moment’s notice — more information than can be consumed in a lifetime. That’s a good thing for humanity (more information empowers citizens and consumers alike), and it also means that more people are consuming more news than ever. But it creates challenges as well. It has changed the economics of offline media, destroying the scarcity that subsidized their advertising revenues.

We are now in the midst of a great transition, and while change is never easy, newspapers have a long history of adapting to change. One thing is clear, at least: the publishers that embrace the opportunities offered by the web — and recognize its limits — will be the ones the thrive in the years to come. Confronted with a fundamental shift in consumer behavior, adaptation is better than the alternative, as Studebaker would no doubt attest.

And finally…

Micropayments are not a panacea. but they do have an important role to play in the future of news in an online era. There are still many questions, of course, but we’re happy to be working with publishers, developers and consumers to find new answers.